If you are not aware of it, leave travel allowance (LTA) forms a part of your CTC (cost to company). You can claim a "leave travel concession" as a salaried taxpayer under section 10(5) of the Income Tax Act, 1961. It is an exemption on expenses incurred to travel for personal reasons on a leave anywhere in the country.
What is the benefit of claiming LTA?
The deduction/exemption helps in reducing the taxpayer's total taxable income in a financial year. This is especially beneficial for those who work away from their hometown.
How many times can LTA exemption be claimed?
LTA exemption cannot be claimed for every vacation. It is available for 2 journeys in a block of 4 calendar years.
What is a block year in claiming LTA?
Block years are decided by the government for the purposes of LTA exemption. These are grouped in a set of 4 calendar years. These are different from the financial years usually considered for income tax exemption purposes.
The first one was started in 1986. The previous two block years have been 2010-13 and 2014-17. The current block year is 2018-21. Any two journeys you take between January 2018 to December 2021, will have to be claimed in that period and within the limits your allowance. Pending claims can be carried forward to the next block with limitations.
Why is 2018 calendar year important for the previous block year?
An employee is allowed to carry forward any pending claims that may not have been made in the previous block period but this has to be availed within the first calendar year succeeding the block.
For example, the employee has only availed the LTA exemption for one journey in 2014-17, he/she can make 3 such LTA exemptions in the following block year 2018-21. However, the unclaimed LTA from the previous block has to be utilized within the first calendar year, that is 2018.
Conditions on claiming LTA exemption
- Only domestic travel is considered for LTA.
- The days for which the exemption is being claimed are to be marked as "leave" in your attendance profile. You may not be allowed to claim LTA exemption on days marked as official holidays or weekends.
- The exemption includes expenses on travel like air, train or bus fare utilized but not on stay, food, etc.
- The exemption can be claimed on expenses incurred on employee and his/her family's travel. A family for the claim purposes includes spouse, children and wholly/mainly dependent parents. If the employee's children were born after 1 October 1998, the exemption cannot be claimed for more than 2 children. Multiple births in the second occasion after the first child will not be affected by the restriction.
- In case you haven't travelled at all during the period or do not have sufficient proof to make claims, you will receive the LTA as a part of your salary after applicable tax deduction as per your tax slab. You will only get a tax break when you are able to submit proof of travel.
- LTA exemption can also be claimed for LTA received from the previous employer in case of retirement or termination of employment.
How much LTA can be claimed by an employee?
- The amount of LTA that one can claim is equal to employee's portion of LTA.
- If the destination is not connected by any public recognized mode of transport or connected by rail, the maximum amount that can be claimed will be equal to the air-conditioned first class train fare by the shortest route.
- If the destination is not connected by rail but by any other recognized public transport, then the amount is restricted to first class or the deluxe fare of the transport service by the shortest route.
- In case of air travel, the maximum amount to be claimed is restricted to the economy fare of the national carrier (Air India) by the shortest route to the destination.
- If you are travelling to multiple places during a single vacation, the travel cost to the farthest destination by the shortest route will be considered as the maximum limit.
How to claim LTA?
- You are required to contact your employer to claim the LTA and the criteria to make the claims are also employer-specific.
- You will be required to submit proof of travel like tickets, boarding pass and the invoice submitted to the travel agent. The supporting documents required and other declarations are employer specific.
- You will have to submit form 12BB, which is a statement that shows the particulars of claims made by the employee for tax deduction under section 192. This will give the employer an idea of your deductible investment and expenses during the year, so as to deduct the correct TDS (tax deducted at source).
- Your spouse can also claim LTA if you have both traveled together and you have used both your claims.